Ipsen’s First Half 2016 Results

28.7.2016 05:00 | Business Wire

Del

Regulatory News:

Ipsen (Euronext: IPN; ADR: IPSEY), a global specialty-driven
pharmaceutical group, today announced financial results for the first
half 2016. The Board of Directors, chaired by Marc de Garidel, met on 27
July 2016 to approve the financial statements for the first half 2016.

Extract of consolidated results for the first halves 2016 and
2015

(in million euros)

H1 2016

H1 2015

% change

Group sales

763.8

713.9

+9.7%1

Specialty Care sales

613.5

548.9

+14.3%1

Primary Care sales

150.4

165.0

-5.9%1

Core Operating Income

188.8

167.6

+12.6%

Core operating margin

24.7%

23.5%

+1.2 pts

Consolidated net profit

133.3

90.5

+47.4%

Core EPS – fully diluted (€)

1.74

1.50

+16.0%

Free cash flow

73.6

22.4

+328.6%

Closing net cash2

17.3

70.8

-75.6%

Commenting on the first half 2016 performance, David Meek, Chief
Executive Officer of Ipsen, said: “We are very pleased with the
Group’s strong operating performance in the first half of 2016. Sales
grew by nearly 10% year-on-year and core operating margin improved by
1.2 points, both driven primarily by solid Specialty Care growth.”

David Meek added: “Ipsen is in a unique transformational phase
with several key drivers to accelerate growth. Somatuline®
and Dysport® have both established strong
momentum with additional opportunities for expanded indications. We are
also preparing for the successful launch of two new products. First,
Cabometyx™ in Europe for advanced renal cell carcinoma, for which we
recently received a positive CHMP opinion, and subsequently, telotristat
etiprate in 2017 to further build our position in the neuroendocrine
tumor market. We continue to advance many important pipeline programs
and are encouraged by the significant potential of the company as we
enter this new era of growth.”

In the first half of 2016, Group sales reached €763.8 million, up
9.7% year-on-year. Specialty Care sales reached €613.5 million,
up 14.3%, driven by the strong growth of Somatuline® in the
neuroendocrine tumor indication in North America, as well as a solid
performance throughout Europe.

For Dysport®, good performance in Russia, the US and Germany
was offset by inventory trends in the Middle East and Brazil. Decapeptyl®
sales reflect good volume growth in Europe offset by inventory trends in
the Middle East and price pressure in China.

In the first half of 2016, Primary Care reached €150.4 million,
down 5.9% year-on-year. Sales were impacted by lower Smecta®
sales in Asia and Tanakan® sales in Russia.

Core Operating Income totaled €188.8 million in the first half of
2016, up 12.6%. Core operating margin reached 24.7%, up 1.2 points
compared to the first half of 2015, mainly driven by strong business
performance, partially offset by investments for the Cabometyx™ launch
and the adverse impact of foreign currencies.

Consolidated net profit was €133.3 million, up 47.4% over the
period, compared to €90.5 million in 2015, which included the net impact
of the depreciation of intangible assets related to tasquinimod in the
amount of €39.6 million after tax.

Fully diluted core earnings per share (see Appendix 4) grew by
16.0% year-on-year to reach €1.74 for the first half of 2016, compared
to €1.50 in 2015.

Free cash flow generated in the first half of 2016 reached €73.6
million, up significantly by €51.2 million, driven by the increase in
core operating income and improved management of working capital.

Closing net cash reached €17.3 million as of June 2016, compared
to €70.8 million as of June 2015 after the upfront payment for the
cabozantinib license to Exelixis for €183.8 million in March 2016.

2016 financial objectives

Based on the first half 2016 performance, the Group raises its guidance
for Specialty Care sales growth to greater than 12% and
reaffirms its target for Core Operating margin of around 21%,
assuming higher investments required to prepare the commercial launch of
Cabometyx™, and further investments in the US to support the accelerated
growth of Somatuline® and additional launches of Dysport®.

Previous FY 2016 guidance

Revised FY 2016 guidance

Specialty Care growth

Growth >+10%

Growth >+12%

Primary Care growth

Slight growth

Slight growth

Core Operating margin

Around 21%

Around 21%

Sales objectives are set at constant currency.

The interim financial report, with regard to regulated information, is
available on the Group's website, www.ipsen.com,
under the Regulated Information tab in the Investor Relations section.

Meeting, webcast and conference call (in English) for the financial
community

Ipsen will host an analyst meeting on Thursday 28 July 2016 at 2:30 p.m.
(Paris time, GMT+1) at its headquarters in Boulogne-Billancourt
(France). A conference call will take place and a web conference (audio
and video webcast) will be available at www.ipsen.com.
Participants should dial in to the call approximately 5 to 10 minutes
prior to its start. No reservation is required to participate in the
conference call.

Ipsen is a global specialty-driven pharmaceutical group with total sales
exceeding €1.4 billion in 2015. Ipsen sells more than 20 drugs in more
than 115 countries, with a direct commercial presence in more than 30
countries. Ipsen’s ambition is to become a leader in specialty
healthcare solutions for targeted debilitating diseases. Its fields of
expertise cover oncology, neurosciences and endocrinology (adult &
pediatric). Ipsen’s commitment to oncology is exemplified through its
growing portfolio of key therapies improving the care of patients
suffering from prostate cancer, bladder cancer and neuro-endocrine
tumors. Ipsen also has a significant presence in primary care. Moreover,
the Group has an active policy of partnerships. Ipsen's R&D is focused
on its innovative and differentiated technological platforms, peptides
and toxins, located in the heart of the leading biotechnological and
life sciences hubs (Les Ulis/Paris-Saclay, France; Slough/Oxford, UK;
Cambridge, US). In 2015, R&D expenditures neared €193 million. The Group
has more than 4,600 employees worldwide. Ipsen’s shares are traded on
segment A of Euronext Paris (stock code: IPN, ISIN code: FR0010259150)
and are eligible to the “Service de Règlement Différé” (“SRD”). The
Group is part of the SBF 120 index. Ipsen has implemented a Sponsored
Level I American Depositary Receipt (ADR) program, which trades on the
over-the-counter market in the United States under the symbol IPSEY. For
more information on Ipsen, visit www.ipsen.com.

Forward Looking Statement

The forward-looking statements, objectives and targets contained herein
are based on the Group’s management strategy, current views and
assumptions. Such statements involve known and unknown risks and
uncertainties that may cause actual results, performance or events to
differ materially from those anticipated herein. All of the above risks
could affect the Group’s future ability to achieve its financial
targets, which were set assuming reasonable macroeconomic conditions
based on the information available today. Use of the words "believes,"
"anticipates" and "expects" and similar expressions are intended to
identify forward-looking statements, including the Group’s expectations
regarding future events, including regulatory filings and
determinations. Moreover, the targets described in this document were
prepared without taking into account external growth assumptions and
potential future acquisitions, which may alter these parameters. These
objectives are based on data and assumptions regarded as reasonable by
the Group. These targets depend on conditions or facts likely to happen
in the future, and not exclusively on historical data. Actual results
may depart significantly from these targets given the occurrence of
certain risks and uncertainties, notably the fact that a promising
product in early development phase or clinical trial may end up never
being launched on the market or reaching its commercial targets, notably
for regulatory or competition reasons. The Group must face or might face
competition from generic products that might translate into a loss of
market share. Furthermore, the Research and Development process involves
several stages each of which involves the substantial risk that the
Group may fail to achieve its objectives and be forced to abandon its
efforts with regards to a product in which it has invested significant
sums. Therefore, the Group cannot be certain that favorable results
obtained during pre-clinical trials will be confirmed subsequently
during clinical trials, or that the results of clinical trials will be
sufficient to demonstrate the safe and effective nature of the product
concerned. There can be no guarantees a product will receive the
necessary regulatory approvals or that the product will prove to be
commercially successful. If underlying assumptions prove inaccurate or
risks or uncertainties materialize, actual results may differ materially
from those set forth in the forward-looking statements. Other risks and
uncertainties include but are not limited to, general industry
conditions and competition; general economic factors, including interest
rate and currency exchange rate fluctuations; the impact of
pharmaceutical industry regulation and health care legislation; global
trends toward health care cost containment; technological advances, new
products and patents attained by competitors; challenges inherent in new
product development, including obtaining regulatory approval; the
Group's ability to accurately predict future market conditions;
manufacturing difficulties or delays; financial instability of
international economies and sovereign risk; dependence on the
effectiveness of the Group’s patents and other protections for
innovative products; and the exposure to litigation, including patent
litigation, and/or regulatory actions. The Group also depends on third
parties to develop and market some of its products which could
potentially generate substantial royalties; these partners could behave
in such ways which could cause damage to the Group’s activities and
financial results. The Group cannot be certain that its partners will
fulfil their obligations. It might be unable to obtain any benefit from
those agreements. A default by any of the Group’s partners could
generate lower revenues than expected. Such situations could have a
negative impact on the Group’s business, financial position or
performance. The Group expressly disclaims any obligation or undertaking
to update or revise any forward looking statements, targets or estimates
contained in this press release to reflect any change in events,
conditions, assumptions or circumstances on which any such statements
are based, unless so required by applicable law. The Group’s business is
subject to the risk factors outlined in its registration documents filed
with the French Autorité des Marchés Financiers.

The risks and uncertainties set out are not exhaustive and the reader is
advised to refer to the Group’s 2015 Registration Document available on
its website (www.ipsen.com).

Comparison of consolidated sales for the second quarters and first
halves of 2016 and 2015:

The following table shows sales by therapeutic area and by product for
the second quarters and first halves 2016 and 2015:

2nd Quarter

1st Half

(in millions euros)

2016

2015

%
Variation

%
Variation
at
constant
currency

2016

2015

%
Variation

%
Variation
at
constant
currency

Oncology

227.5

189.7

19.9%

22.8%

431.9

366.2

17.9%

19.7%

Somatuline®

133.2

98.9

34.6%

37.4%

254.9

188.2

35.4%

37.0%

Decapeptyl®

89.4

86.3

3.5%

6.7%

167.6

169.2

-1.0%

1.1%

Hexvix®

4.9

4.5

10.9%

11.2%

9.4

8.8

7.2%

7.4%

Neurosciences

76.9

72.3

6.5%

12.6%

140.5

141.1

-0.4%

4.6%

Dysport®

76.4

72.0

6.2%

12.2%

139.6

140.6

-0.7%

4.3%

Endocrinology

21.0

21.2

-0.8%

0.3%

41.1

41.6

-1.1%

-0.5%

NutropinAq®

15.2

15.9

-4.1%

-3.4%

30.4

31.7

-4.1%

-3.6%

Increlex®

5.7

5.3

9.0%

11.5%

10.7

9.9

8.7%

9.3%

Specialty Care

325.4

283.2

14.9%

18.6%

613.5

548.9

11.8%

14.3%

Gastroenterology

52.4

54.6

-4.0%

2.4%

103.4

113.8

-9.1%

-5.5%

Smecta®

24.9

26.4

-5.7%

1.7%

54.1

62.3

-13.2%

-9.2%

Forlax®

10.1

9.7

3.7%

5.8%

20.1

18.8

7.0%

8.6%

Cognitive disorders

9.1

13.7

-33.6%

-30.8%

18.9

24.2

-22.0%

-18.9%

Tanakan®

9.1

13.7

-33.6%

-30.8%

18.9

24.2

-22.0%

-18.9%

Other Primary Care

6.8

6.9

-1.8%

-1.3%

13.4

14.9

-9.9%

-9.8%

Drug-related Sales

8.2

5.5

50.6%

50.7%

14.7

12.1

21.3%

21.3%

Primary Care

76.5

80.6

-5.2%

-0.1%

150.4

165.0

-8.9%

-5.9%

Group Sales

401.9

363.8

10.5%

14.5%

763.8

713.9

7.0%

9.7%

In the second quarter of 2016, sales reached €401.9 million, up 14.5%,
driven by the 18.6% growth of Specialty Care sales, while Primary Care
sales slightly declined by 0.1%. In the first half of 2016, sales
amounted to €763.8 million, up 9.7%, driven by the 14.3% growth of
Specialty Care sales, while Primary Care sales declined by 5.9%.

In the second quarter of 2016, sales of Specialty Care products
reached €325.4 million, up 18.6% year-on-year. In the first half of
2016, sales amounted to €613.5 million, up 14.3%. Oncology and
neurosciences sales grew by 19.7% and 4.6%, respectively, while
endocrinology sales decreased by 0.5%. In the first half of 2016, the
relative weight of Specialty Care continued to increase to reach 80.3%
of Group sales, compared to 76.9% in the previous year.

In oncology, sales reached €227.5 million in the second quarter
of 2016, up 22.8% year-on-year, driven by the continued acceleration of
Somatuline® growth. In the first half of 2016, sales amounted
to €431.9 million, up 19.7%, driven by the strong growth of Somatuline®
while Decapeptyl® was slightly up by 1.1%. Oncology sales
represented 56.5% of total Group sales, compared to 51.3% in the
previous year.

Somatuline®–In the second
quarter of 2016, sales reached €133.2 million, up 37.4%. In the first
half of 2016, sales amounted to €254.9 million, up 37.0%, driven by
strong volume growth in North America following the launch of the new
neuroendocrine tumor indication at the beginning of 2015 and by a strong
performance in most European countries, notably in Germany, Poland and
France.

Decapeptyl® – In the second quarter of 2016,
sales reached €89.4 million, up 6.7% year-on-year, driven by strong
volume growth in Europe. In the first half of 2016, sales amounted to
€167.6 million, up 1.1%, negatively impacted by inventory trends in the
Middle East and price pressure in China.

Hexvix® – In the second quarter of 2016, sales
reached €4.9 million, up 11.2% year-on-year. In the first half of 2016,
sales of reached €9.4 million, up 7.4%, mainly driven by the good
performance in Germany, which accounted for a majority of the product
sales.

In neurosciences, sales of Dysport®
reached €76.4 million in the second quarter of 2016, up 12.2%
year-on-year, driven by strong performance in the US and in Russia. In
the first half of 2016, sales amounted to €139.6 million, up 4.3%,
driven by the good performance in Russia, the US and Germany despite the
negative impact of inventory trends in the Middle East and Brazil. Over
the period, neurosciences sales represented 18.4% of total Group sales,
compared to 19.8% in the previous year.

In endocrinology, sales of NutropinAq®reached €15.2 million in the second quarter of 2016, down 3.4%
year-on-year. In the first half of 2016, sales amounted to €30.4
million, down 3.6%, impacted by lower volumes especially in Germany and
Italy, partly offset by good performance in France. In the second
quarter of 2016, sales of Increlex® reached
€5.7 million, up 11.5% year-on-year, notably driven by the United
States. In the first half of 2016, sales amounted to €10.7 million, up
9.3%. Over the period, endocrinology sales represented 5.4% of total
Group sales, compared to 5.8% in the previous year.

In the second quarter of 2016, Primary Care sales reached €76.5
million, slightly down 0.1% year-on-year. In the first half of 2016,
sales amounted to €150.4 million, down 5.9%, mainly impacted by lower Smecta®
sales in Asia and Tanakan® sales in
Russia. Over the period, Primary Care sales represented 19.7% of total
Group sales, compared to 23.1% in the previous year.

In the second quarter of 2016, gastroenterology sales reached
€52.4 million, up 2.4% year-on-year. In the first half of 2016, sales
amounted to €103.4 million, down 5.5%, negatively impacted by inventory
trends in Asia for Smecta®, and for Fortrans®following the product shortage at the beginning of the year.

Smecta® – In the second quarter of 2016, sales reached
€24.9 million, up 1.7% year-on-year. In the first half of 2016, sales
amounted to €54.1 million, down 9.2%, affected by high inventories in
China in the first half of 2015, as well as inventory build in Vietnam,
offsetting good performance in Russia.

Forlax® – In the second quarter of 2016, sales reached
€10.1 million, up 5.8% year-on-year. In the first half of 2016, sales
amounted to €20.1 million, up 8.6%, supported by growing sales to
partners and a good performance in Italy.

In the cognitive disorders area, sales of Tanakan®reached €9.1 million in the second quarter of 2016, down 30.8%
year-on-year, due to a market slowdown in France and in Russia. Sales in
the first half of 2016 amounted to €18.9 million, down 18.9%.

Sales of Other Primary Care productsreached €6.8 million
in the second quarter of 2016, down 1.3% year-on-year. In the first half
of 2016, sales amounted to €13.4 million, down 9.8%, mainly affected by
the 20.7% decline of Nisis®/Nisisco®,
an additional 40.0% price cut in February 2015 in France, and by Adrovance®
underperformance, down 16.1% sales over the semester.

In the second quarter of 2016, Drug-related sales (active ingredients
and raw materials) reached €8.2 million, up 50.7% year-on-year. In
the first half 2016, sales amounted to €14.7 million, up 21.3% driven by
solid sales to the Group partner Schwabe.

Sales by geographical area

Group sales by geographical area in the second quarters and first halves
2016 and 2015 were as follows:

2nd Quarter

1st Half

(in million euros)

2016

2015

%
Variation

%
Variation
at
constant
currency

2016

2015

%
Variation

%
Variation
at
constant
currency

France

56.4

52.8

6.9%

6.9%

111.5

106.9

4.4%

4.4%

Germany

31.4

27.0

16.4%

16.4%

60.8

53.5

13.7%

13.7%

Italy

21.4

20.8

3.0%

3.0%

43.0

42.0

2.4%

2.4%

United Kingdom

18.6

18.7

-0.2%

8.6%

37.1

37.1

0.1%

6.1%

Spain

18.0

15.8

13.9%

13.9%

34.9

32.6

7.0%

7.0%

Major Western European countries

145.9

135.0

8.0%

9.2%

287.4

272.1

5.6%

6.4%

Eastern Europe

45.6

44.7

1.9%

13.7%

85.1

84.1

1.2%

10.2%

Others Europe

43.2

39.2

10.4%

10.6%

84.1

76.6

9.9%

10.3%

Other European Countries

88.8

83.9

5.9%

12.2%

169.2

160.7

5.3%

10.2%

North America

64.8

37.6

72.2%

75.3%

118.2

67.5

75.2%

75.1%

Asia

55.4

57.1

-3.0%

2.8%

101.4

116.8

-13.2%

-10.2%

Other countries in the Rest of the world

47.0

50.2

-6.2%

-0.8%

87.7

96.9

-9.5%

-4.5%

Rest of the World

102.4

107.3

-4.5%

1.1%

189.1

213.7

-11.5%

-7.6%

Group Sales

401.9

363.8

10.5%

14.5%

763.8

713.9

7.0%

9.7%

In the second quarter of 2016, sales in the Major Western European
countries reached €145.9 million, up 9.2% year-on-year. In the first
half of 2016, sales in the Major Western European countries amounted to
€287.4 million, up 6.4%. Sales in the Major Western European countries
represented 37.6% of total Group sales, compared to 38.1% in the
previous year.

France – In the second quarter of 2016, sales reached €56.4
million, up 6.9% year-on-year. In the first half of 2016, sales amounted
to €111.5 million, up 4.4%, driven by the sustained growth of Somatuline®
and NutropinAq®. Primary Care sales continued to
decrease, notably due to Tanakan®, Adrovance® and
Nisis®/Nisisco®,but partlyoffset
by the good performance of Ginkor® and Forlax®.
The relative weight of France in the Group’s consolidated sales has
continued to decrease to represent 14.6% of total Group sales, compared
to 15.0% in the previous year.

Germany – In the second quarter of 2016, sales reached €31.4
million, up 16.4% year-on-year. In the first half of 2016, sales
amounted to €60.8 million, up 13.7%, driven by strong growth of
Somatuline® and Dysport® as well as the supply
sales to the Group partner Schwabe. Over the period, sales in Germany
represented 8.0% of total Group sales, compared to 7.5% in the previous
year.

Italy – In the second quarter of 2016, sales reached €21.4
million, up 3.0% year-on-year. In the first half of 2016, sales amounted
to €43.0 million, up 2.4%. The strong growth of Somatuline®
and Forlax® was partly offset by the sales decline of Dysport®
and NutropinAq®. Over the period, sales in Italy represented
5.6% of total Group sales, compared to 5.9% in the previous year.

United Kingdom – In the second quarter of 2016, sales reached
€18.6 million, up 8.6% year-on-year. In the first half of 2016, sales
amounted to €37.1 million, up 6.1%, driven by Somatuline® and
Decapeptyl® growth and a positive impact from the 2016 price
adjustment mechanism (PPRS1). Over the period, the United
Kingdom represented 4.9% of total Group sales, compared to 5.2% in the
previous year.

Spain – In the second quarter of 2016, sales reached €18.0
million, up 13.9% year-on-year. In the first half of 2016, sales
amounted to €34.9 million, up 7.0%, affected by a 5% price decrease on
Somatuline® 120mg implemented in March 2016, and offset by
strong volume growth for the product, as well as for Decapetpyl®.
Over the period, sales in Spain represented 4.6% of total Group sales,
stable year-on-year.

In the second quarter of 2016, sales in Other European countries
reached €88.8 million, up 12.2% year-on-year. In the first half of 2016,
sales amounted to €169.2 million, up 10.2%, supported by the strong
performance of Somatuline® across the region and of Dysport®,
Decapeptyl® and Smecta® in Russia, partly offset
by the Tanakan® slowdown. Over the period, sales in the
region represented 22.2% of total Group sales compared to 22.5% in the
previous year.

In the second quarter of 2016, sales generated in North America
reached €64.8 million, up 75.3% year-on-year. In the first half of 2016,
sales amounted to €118.2 million, up 75.1%, supported by the
acceleration of Somatuline® growth following the launch of
the neuroendocrine tumor indication and the growth of Dysport® after
the launch in spasticity. Over the period, sales in North America
represented 15.5% of total Group sales, compared to 9.4% in the previous
year.

In the second quarter of 2016, sales in the Rest of the World
reached €102.4 million, up 1.1% year-on-year. In the first half of 2016,
sales amounted to €189.1 million, down 7.6%. Sales were impacted by
unfavorable inventory effects on Smecta® in China, on
Decapeptyl® in the Middle East and on Dysport® in
southeast Asia and Brazil. Over the period, sales in the Rest of the
World represented 24.8% of total Group sales, compared to 29.9% in the
previous year.

First half 2016 consolidated income statement versus prior-year period

(in millions of euros)

30 June 2016

30 June 2015

Change

% of sales

% of sales

Sales

763.8

100.0%

713.9

100.0%

7.0%

Other revenues

42.8

5.6%

38.0

5.3%

12.4%

Revenue

806.6

105.6%

751.9

105.3%

7.3%

Cost of goods sold

(172.2)

-22.5%

(168.3)

-23.6%

2.3%

Selling expenses

(283.2)

-37.1%

(259.9)

-36.4%

8.9%

Research and development expenses

(95.0)

-12.4%

(91.8)

-12.9%

3.4%

General and administrative expenses

(59.0)

-7.7%

(61.3)

-8.6%

-3.7%

Other core operating income

0.2

0.0%

1.9

0.3%

-86.8%

Other core operating expenses

(8.6)

-1.1%

(4.8)

-0.7%

79.0%

Core Operating Income

188.8

24.7%

167.6

23.5%

12.6%

Other operating income

0.9

0.1%

1.4

0.2%

-34.0%

Other operating expenses

(6.4)

-0.8%

(8.0)

-1.1%

-18.9%

Restructuring costs

(0.4)

0.0%

(0.7)

-0.1%

-46.8%

Impairment losses

(8.4)

-1.1%

(57.0)

-8.0%

-85.3%

Operating Income

174.6

22.9%

103.4

14.5%

68.8%

Investment income

0.4

0.1%

0.6

0.1%

-35.1%

Financing costs

(1.5)

-0.2%

(2.5)

-0.4%

-42.1%

Net financing costs

(1.1)

-0.1%

(1.9)

-0.3%

-44.3%

Other financial income and expense

(1.8)

-0.2%

5.1

0.7%

-135.8%

Income taxes

(39.4)

-5.2%

(17.9)

-2.5%

120.1%

Share of net profit (loss) from entities accounted for
using
the equity method

At the end of June 2016, the Group's consolidated sales came to €763.8
million, up 7.0% year-on-year and up 9.7% excluding the impact from
foreign exchange fluctuations.

Other revenues

Other revenues for the first semester totaled €42.8 million, up 12.4%
over the €38.0 million recorded in the six-month period ended 30 June
2015.

The evolution was attributable to the following:

- higher royalties received from Group partners, mainly Galderma for
Dysport® and Menarini for the Adenuric® product;

- the new distribution model for Etiasa® in China;

- partially offset by the recognition in 2015 of an upfront payment of
€3.4 million received by Ipsen as part of its sale of Ginkor Fort®
licensing rights in Group territories to Tonipharm.

Cost of goods sold

For the six months ended 30 June 2016, cost of goods sold amounted to
€172.2 million, representing 22.5% of sales compared to €168.3 million,
or 23.6% of sales, in the prior-year period.

The improvement in cost of goods sold as a percentage of sales is
primarily due to a favorable product mix arising from the growth of the
Specialty Care business, and from productivity efforts deployed at
manufacturing sites. Moreover, royalties paid to partners increased in
line with Group sales.

Selling expenses

At the end of June 2016, selling expenses came to €283.2 million,
representing 37.1% of sales, up 8.9% versus end of June 2015. The
increase reflects the commercial efforts deployed to support the growth
of Somatuline® and to launch Dysport® in
spasticity indications in the United States. It also resulted from
strengthening the sales force in China following a change in the Primary
Care distribution model.

Research and development expenses

For the half-year period ended 30 June 2016, research and development
expenses totaled €95.0 million, compared with €91.8 million in the same
period in 2015.

In neurosciences, expenditures were committed to continue managing the
lifecycle of Dysport®, in particular by extending its
indications in spasticity. New oncology programs based on peptide
receptor radionuclide therapy were also under way.

At 30 June 2016, the research tax credit amounted to €12.4 million, down
€1.2 million versus a year earlier.

General and administrative expenses

For the six months ended 30 June 2016, general and administrative
expenses came to €59.0 million, down €2.3 million versus the same period
in 2015. The decline resulted primarily from the change in the Group's
corporate governance.

Other core operating income and expenses

In the first half of 2016, other core operating expenses totaled €8.4
million, compared with other core operating expenses of €2.9 million in
the first half of 2015. This evolution is mainly driven by the impact of
the currency hedging policy.

Core Operating Income

Core Operating Income in the first half of 2016 came to €188.8 million,
representing 24.7% of sales, compared with €167.6 million in Core
Operating Income in the first half of 2015, representing 23.5% of sales.
The robust Somatuline® performance in the United States and
Europe, coupled with the strengthening partnership with Galderma,
enabled the Group to intensify its commercial investments, while
improving its profitability by 1.2 points. The growth of the Core
Operating Income between June 2015 and June 2016 reached 12.6%.

Other operating income and expenses

Other non-core operating expenses for the six months ended 30 June 2016
amounted to €5.5 million and consisted mainly of the impact from the
change in corporate governance and expenses arising from consolidating
Ipsen's UK R&D capacities to the Oxford site.

In the first half of 2015, those expenses totaled €6.6 million. They
corresponded mainly to the amount booked following the discontinuation
of the tasquinimod studies for prostate cancer.

Restructuring costs

For the period ended 30 June 2016, restructuring costs came to €0.4
million, compared with €0.7 million for the prior-year period.

Impairment losses

At 30 June 2016, Ipsen recorded impairment of an intangible asset in the
amount of €8.4 million.

At 30 June 2015, the Group recorded a €57.0 million impairment loss
after writing down all intangible assets related to the tasquinimod
program after the decision was made to discontinue clinical studies in
prostate cancer.

Net financing costs and other financial income and expense

In the first half of 2016, the Group had net financial expenses of €2.9
million, versus net financial income of €3.2 million in the first half
of 2015.

Net financing costs amounted to €1.1 million, versus €1.9
million at end June 2015, resulting mainly from the general context of
interest rates decrease.

In the first half of 2016, other financial expense amounted to
€1.8 million, compared to other financial income of €5.1 million in
the first half of 2015 related to a final €4.9 million earnout payment
received in 2015 from the sale of PregLem shares, and to foreign
exchange fluctuations.

Income taxes

In the first half of 2016, income tax expense of €39.4 million resulted
from an effective tax rate of 23.0% on pre-tax profit from continuing
operations, excluding the share of net profit (loss) from entities
accounted for using the equity method. That compares with an effective
rate of 16.8% in the year-earlier period.

The Group's effective tax rate was lower at 30 June 2015 as a result of
writing down tasquinimod-related intangible assets, which were tax
deductible at a 38.0% rate.

Consolidated net profit

At the end of June 2016, consolidated net profit increased 47.4% to
€133.3 million, with €133.0 million attributable to Ipsen S.A.
shareholders. That performance compares with consolidated net profit of
€90.5 million, with €90.1 million attributable to Ipsen S.A.
shareholders, at the end of June 2015.

Earnings per share

For the six months ended 30 June 2016, basic earnings per share
attributable to Ipsen S.A. shareholders amounted to €1.62, up from basic
earnings per share of €1.10 in the prior-year period, which included the
impact of the tasquinimod impairment.

At the end of June 2016, diluted core earnings per share (see Appendix
4) came to €1.74, up 16.0% versus €1.50 per share at the end of June
2015.

Operating segments: Core Operating Income by therapeutic area

Segment information is presented according to the Group's two operating
segments, i.e. Specialty Care and Primary Care.

All costs allocated to these two segments are presented in the key
performance indicators. Only Research and Development costs and
corporate overhead costs are not allocated to the two operating segments.

The Group uses Core Operating Income to measure its segment performance
and to allocate resources.

Sales, revenue and Core Operating Income are presented by therapeutic
area for the 2016 and 2015 half-year periods in the following table.

(in millions of euros)

30 June 2016

30 June 2015

Change

%

Specialty care

Sales

613.5

548.9

64.6

11.8%

Revenue

632.6

565.2

67.5

11.9%

Core Operating Income

288.1

239.0

49.1

20.5%

% of sales

47.0%

43.5%

Primary care (*)

Sales

150.4

165.0

(14.6)

-8.9%

Revenue

174.0

186.7

(12.8)

-6.8%

Core Operating Income

53.5

68.2

(14.7)

-21.5%

% of sales

35.6%

41.3%

Total unallocated

Core Operating Income

(152.8)

(139.6)

(13.2)

9.5%

Group total

Sales

763.8

713.9

50.0

7.0%

Revenue

806.6

751.9

54.7

7.3%

Core Operating Income

188.8

167.6

21.2

12.6%

% of sales

24.7%

23.5%

(*) including drug related sales.

For the half year period ended 30 June 2016, Specialty Care sales
grew to €613.5 million, up 11.8% over the first six months of 2015,
driven by oncology sales that advanced from 17.9% at current rates. The
relative weight of Specialty Care products continued to increase,
reaching 80.3% of total consolidated sales at 30 June 2016, versus 76.9%
a year earlier. In the first half of 2016, Core Operating Income
for Specialty Care amounted to €288.1 million, representing 47.0% of
sales. That result compares to €239.0 million in the prior-year period,
representing 43.5% of sales. The improvement reflects Somatuline®'s
continued sales growth in the United States and Europe, along with
increased commercial investments, notably in the United States.

For the six months ended 30 June 2016, sales of Primary Care
products came to €150.4 million, down 8.9% year on year, impacted by a
decline of international sales. In the first half of 2016, Core
Operating Income for Primary Care amounted €53.5 million,
representing 35.6% of sales.

In the first half of 2016, unallocated Core Operating Income came
to a negative €152.8 million, compared with a negative €139.6 million in
the year-earlier period. These expenses consisted mainly of the Group's
research and development costs, which totaled €93.1 million in 2016,
versus €90.6 million in 2015, of unallocated headquarter expenses and of
the effects of the currency hedging policy.

Net cash flow and financing

In the first half of 2016, the Group generated a net cash flow decrease
of €169.7 million, bringing closing net cash to €17.3 million.

Analysis of the consolidated net cash flow statement

(in millions of euros)

30 June 2016

30 June 2015

Opening net cash / (debt)

186.9

160.8

Core Operating Income

188.8

167.6

Non-cash items

(2.9)

9.6

Change in operating working capital requirement

(26.3)

(72.0)

(Increases) decreases in other working capital requirement

(8.9)

(21.9)

Net capex (excluding milestones paid)

(34.9)

(19.9)

Dividends received from entities accounted for using the equity
method

1.2

1.6

Operating Cash Flow

117.0

65.1

Other operating income and expenses and restructuring costs (cash)

(10.2)

(20.8)

Financial income (cash)

2.3

2.1

Current income tax (P&L, excluding provisions for tax contingencies)

(34.8)

(30.2)

Other operating cash flow

(0.6)

6.2

Free Cash Flow

73.6

22.4

Dividends paid

(70.3)

(70.5)

Net investments (business development and milestones)

(172.6)

(38.5)

Share buyback

-

(3.9)

Other (discontinued operations)

(0.3)

0.5

Shareholders return and external growth operations

(243.3)

(112.5)

CHANGE IN NET CASH / (DEBT)

(169.7)

(90.1)

Closing net cash / (debt)

17.3

70.8

Operating Cash Flow

At 30 June 2016, Operating Cash Flow totaled €117.0 million, up €51.9
million versus 30 June 2015. The increase was driven by higher Core
Operating Income and by the improvement in working capital requirement
(WCR), but was partially offset by higher net capital expenditure
(excluding milestones paid).

Working capital requirement for operating activities increased by €26.3
million at 30 June 2016, compared with an increase of €72.0 million at
30 June 2015. The change at 30 June 2016 stemmed mainly from the
following:

A €7.0 million rise in inventories during the first half, in step with
business growth;

A €22.4 million advance in trade receivables at 30 June 2016, in line
with sales growth. That result compares to a €60.2 million increase in
trade receivables at the end of June 2015, arising primarily from
extraordinary sales growth, notably in the United States;

A limited €3.1 million rise in trade payables at the end of June 2016.
At the end of June 2015, trade payables declined by €12.4 million. In
the first half of 2016, other WCR increased €8.9 million, compared
with a €21.9 million increase in other WCR in the first half of 2015.
The variation arose chiefly from recognizing deferred income and from
the reimbursement of the 2012 R&D tax credit received in 2016.

Net capital expenditure advanced €15.0 million year-on-year to €34.9
million at 30 June 2016. These investments mainly encompassed capital
spending to boost production capacity in the United Kingdom and France.

Free Cash Flow

At 30 June 2016, Free Cash Flow came to €73.6 million, up €51.2 million
versus 30 June 2015. This evolution is mainly driven by the Operating
Cash Flow improvement.

Other non-core operating income and expenses and restructuring costs
included €10.2 million in costs arising from the change in corporate
governance, as well as payments for earlier restructuring plans that
were staggered over several fiscal periods. At the end of June 2015,
€20.8 million of such payments were primarily comprised of restructuring
costs and expenses arising from discontinuing clinical trials of
tasquinimod.

The €2.3 million in financial income collected at the end of June 2016
resulted mainly from the collection of dividends, an earnout payment
related to the sale of Spirogen shares and realized foreign exchange
gains. In comparison, the €2.1 million in financial income collected at
the end of June 2015 were derived from a €4.9 million earnout payment
from the PregLem shares that was partially offset by an unfavorable
foreign exchange fluctuations effect.

The change in current income tax stemmed from the change in the
effective tax rate.

Shareholders return and external growth operations

At 30 June 2016, the dividend payout to Ipsen S.A. shareholders amounted
to €70.0 million.

Net financial investments at 30 June 2016 mainly encompassed a €183.8
million upfront payment to Exelixis, following the signature of an
exclusive licensing agreement to commercialize and develop cabozantinib
and a €5 million upfront payment to 3B Pharmaceuticals GmbH, following
the signature of an exclusive licensing agreement for new
radiopharmaceutical products in oncology.

This amount is partially offset by regulatory milestone payments
received from Acadia (€7 million) and Radius (€3 million) and by
scheduled payments related to the agreement signed with Galderma in
December 2015 for Asia-Pacific markets (collection of a net €7 million).

At 30 June 2015, net investments primarily included the €31.3 million
acquisition of OctreoPharm Sciences GmbH and the purchase of a €6.0
million call option to acquire Canbex Therapeutics.

(**) Financial liabilities mainly exclude €12.6 million in
derivative instruments at 30 June 2016, compared with
€0.5
million in derivative instruments at 30 June 2015.

Analysis of Group cash

On 16 June 2016, Ipsen S.A. issued €300 million in unsecured, seven-year
bonds. The bonds mature on 16 June 2023 and pay an annual interest rate
of 1.875%.
The purpose of the issue was to diversify and extend the
maturity of Ipsen's sources of funds and to support its investment and
development strategy.

Further, on 24 June 2016, Ipsen S.A. appended a rider to a €500 million
syndicated loan that it had contracted on 17 October 2014. As a result,
the syndicated loan amount was reduced to €300 million, and the
covenants, i.e. the leverage and gearing ratios, were removed. This
multiple-currency credit line was established to meet the general
financing needs of the Group's operations. At the initiative of the
borrower, the line may be drawn down for short-term periods. At 30 June
2016, this credit line remained untapped.

In addition, €300 million in depreciable bank loans were contracted with
a maturity of 6.5 years.

At 30 June 2016, none of these bank loans had been tapped.

Further, Ipsen S.A. on 2 December 2015 established a €300 million
program to issue commercial papers to meet its short term general
financing requirements. At 30 June 2016, €20 million in commercial
papers have been issued.

APPENDICES

Appendix 1 – Consolidated income statement

(in millions of euros)

30 June 2016

30 June 2015

Sales

763.8

713.9

Other revenues

42.8

38.0

Revenue

806.6

751.9

Cost of goods sold

(172.2)

(168.3)

Selling expenses

(283.2)

(259.9)

Research and development expenses

(95.0)

(91.8)

General and administrative expenses

(59.0)

(61.3)

Other core operating income

0.2

1.9

Other core operating expenses

(8.6)

(4.8)

Core Operating Income

188.8

167.6

Other operating income

0.9

1.4

Other operating expenses

(6.4)

(8.0)

Restructuring costs

(0.4)

(0.7)

Impairment losses

(8.4)

(57.0)

Operating Income

174.6

103.4

Investment income

0.4

0.6

Financing costs

(1.5)

(2.5)

Net financing costs

(1.1)

(1.9)

Other financial income and expense

(1.8)

5.1

Income taxes

(39.4)

(17.9)

Share of net profit (loss) from entities accounted for using the
equity method

Change in other operating assets and liabilities (excluding
milestones received)

(31.9)

(27.4)

Other changes in working capital requirement

(8.9)

(21.9)

Acquisition of property, plant & equipment

(35.2)

(16.4)

Acquisition of intangible assets (excluding milestones paid)

(4.7)

(4.0)

Change in working capital related to investment activities

5.0

0.4

Net capex (excluding milestones paid)

(34.9)

(19.9)

Dividends received from entities accounted for using the equity
method

1.2

1.6

Operating Cash Flow

117.0

65.1

Other operating income and expenses and restructuring costs (cash)

(10.2)

(20.8)

Financial income (cash)

2.3

2.1

Current income tax (P&L, excluding provisions for tax contingencies)

(34.8)

(30.2)

Other operating cash flow

(0.6)

6.2

Free Cash Flow

73.6

22.4

Dividends paid (including payout to non-controlling interests)

(70.3)

(70.5)

Acquisition of shares in non-consolidated companies

0.0

(31.3)

Acquisition of other financial assets

(0.0)

(6.0)

Proceeds from sales of investment securities

-

0.1

Milestones paid (a)

(193.9)

(1.4)

Milestones received (b)

21.3

-

Net investments (business development and milestones)

(172.6)

(38.5)

Share buybacks

-

(3.9)

Other (discontinued operations)

(0.3)

0.5

Shareholders return and external growth operations

(243.3)

(112.5)

CHANGE IN NET CASH / (DEBT)

(169.7)

(90.1)

Closing cash and cash equivalents

359.5

87.8

Closing current and non-current financial liabilities

(342.2)

(17.0)

Closing net cash / (debt)

17.3

70.8

(a) Milestones paid correspond to payments subject to the terms and
conditions set out in the Group's partnership agreements. The €183.8
million in milestones paid to Exelixis accounted for the majority of the
milestones paid at 30 June 2016. The amounts paid were recorded as an
increase in intangible assets on the consolidated balance sheet. The
transactions were included in the "Acquisition of intangible assets"
line item in the consolidated statement of cash flow (see Appendix 3.1).

(b)Milestones received are amounts collected by Ipsen from
its partners. Of the €21.3 million in milestones received at 30 June
2016, €11.1 million were paid by Galderma in accordance with the
partnership agreement signed in December 2015 for the Asia Pacific
region. The amounts were recorded as deferred income in the consolidated
balance sheet and then recognized in the income statement as "Other
revenues". Milestones received were included in the "Net change in other
operating assets and liabilities" line item in the consolidated
statement of cash flow (see Appendix 3.1).

Appendix 4 – Core consolidated net profit for the first half of
2016, versus the prior-year period

(in millions of euros)

30 June 2016

Non-core items

30 June 2016
Core

30 June 2015

Non-core items

30 June 2015
Core

Core Operating Income

188.8

-

188.8

167.6

-

167.6

Other operating income

0.9

(0.9)

-

1.4

(1.4)

-

Other operating expenses

(6.4)

6.4

-

(8.0)

8.0

-

Restructuring costs

(0.4)

0.4

-

(0.7)

0.7

-

Impairment losses

(8.4)

8.4

-

(57.0)

57.0

-

Operating Income

174.6

14.3

188.8

103.4

64.2

167.6

Investment income

0.4

-

0.4

0.6

-

0.6

Financing costs

(1.5)

-

(1.5)

(2.5)

-

(2.5)

Net financing costs

(1.1)

-

(1.1)

(1.9)

-

(1.9)

Other financial income and expense

(1.8)

(1.8)

5.1

(4.9)

0.2

Income taxes

(39.4)

(3.9)

(43.3)

(17.9)

(25.3)

(43.2)

Share of net profit (loss) from entities accounted for
using
the equity method

Core Operating Income is the key performance indicator for understanding
and measuring the performance of the Group's activities. Items not
included in Core Operating Income are not tabbed as "exceptional" or
"extraordinary" but correspond to unusual, abnormal or infrequent items
of disclosure targeted in paragraph 28 of the IASB Framework.

6 January 2016 – Ipsen and Galderma announced that they have expanded
the geographical scope of their neurotoxin partnership, whereby
Galderma has acquired the exclusive rights to develop, promote and
distribute Dysport® in the aesthetic indications in the
APAC Territory (China, India, South Korea and Indonesia under certain
conditions).

26 January 2016 – Ipsen announced that the scientific journal Pediatrics
published the detailed results of the Phase 3 randomized study
(NCT01249417) showing both the efficacy and the safety of Dysport®
in the treatment of dynamic equinus foot deformity (also known as
pediatric lower limb spasticity), a condition associated with cerebral
palsy in children.

16 February 2016 – Ipsen announced that at its meeting on 15 February
2016, the Board of Directors decided to change the Company’s form of
governance by separating the duties of Chairman of the Board of
Directors and Chief Executive Officer. The Board of Directors
confirmed that Mr. Marc de Garidel shall fulfill the duties of
Chairman of the Board of Directors within the framework of the new
governance structure and recorded the departure of Mrs. Christel
Bories as Deputy Chief Executive Officer.

1 March 2016 – Exelixis, Inc. and Ipsen jointly announced an exclusive
licensing agreement for the commercialization and further development
of cabozantinib, Exelixis’ lead oncology drug. Under the agreement,
Ipsen will have exclusive commercialization rights for current and
potential future cabozantinib indications outside the United States,
Canada and Japan, including COMETRIQ®, which is currently
approved in the European Union (EU) for the treatment of adult
patients with progressive, unresectable, locally advanced or
metastatic medullary thyroid cancer (MTC).

25 April 2016 – Ipsen announced that its partner Exelixis, Inc.
received approval from the U.S. Food and Drug Administration (FDA) for
CABOMETYX™ (cabozantinib) tablets for the treatment of patients with
advanced renal cell carcinoma (RCC) who have received prior
anti-angiogenic therapy.

26 April 2016 – Ipsen and Probi jointly announced the signature of a
license and supply agreement for the commercialization of Probi’s
probiotic strain Lactobacillus plantarum 299v (LP299V®).
The agreement covers 18 countries, primarily within EU and emerging
markets.

31 May 2016 – Ipsen’s partner, Lexicon, announced FDA Priority Review
of new drug application for telotristat etiprate for the treatment of
carcinoid syndrome.

5 June 2016 – Exelixis, Inc. and Ipsen announced overall survival (OS)
results from the Phase 3 METEOR trial of CABOMETYX™ (cabozantinib)
tablets in patients with advanced renal cell carcinoma (RCC) who have
received prior anti-angiogenic therapy. The OS results demonstrate
that CABOMETYX™ reduces the risk of death by one third versus
everolimus.

6 June 2016 – Exelixis, Inc. and Ipsen announced the presentation of
positive data from subgroup analyses of the pivotal METEOR trial
comparing CABOMETYX™ (cabozantinib) tablets with everolimus in 658
patients with advanced renal cell carcinoma (RCC) who have received
prior anti-angiogenic therapy. The findings demonstrate that benefits
of CABOMETYX™ in progression-free survival (PFS) and overall survival
(OS) were independent of the presence of bone metastases, prior
anti-PD-1/PD-L1 therapy, and the type of prior vascular endothelial
growth factor receptor (VEGFR) tyrosine kinase inhibitor (TKI) therapy.

6 June 2016 – Ipsen announced the launch of an employee shareholding
plan. This plan aims to align employees with the Group’s development
and performance. The main terms and conditions of this plan are
described hereafter.

9 June 2016 – Ipsen announced the successful issue of its inaugural
unsecured 7-year Notes for a total of €300 million. These Notes mature
on June 16, 2023 and pay interest at an annual rate of 1.875%.
Application has been made for the Notes to be admitted to trading on
the regulated market of Euronext Paris.

11 July 2016 – The Board of Directors of Ipsen met on 8 July 2016, and
has appointed David Meek as Chief Executive Officer, effective July
18, 2016. On this date, Marc de Garidel assumes the role of
non-executive chairman and continues to serve the Board of Directors
through his deep industry expertise.

18 July 2016 – Ipsen announced the acceptance by the European
Medicines Agency of the marketing authorization application for
telotristat etiprate to treat carcinoid syndrome caused by
neuroendocrine tumors, in combination with somatostatin analogues.

22 July 2016 – Exelixis, Inc. and Ipsen announced that the Committee
for Medicinal Products for Human Use (CHMP), the scientific committee
of the European Medicines Agency (EMA) provided a positive opinion for
Cabometyx™ (cabozantinib) 20, 40, 60mg for the treatment of advanced
renal cell carcinoma (RCC) in adults following prior vascular
endothelial growth factor (VEGF)-targeted therapy and recommended it
for marketing authorization.

APPENDIX

RISK FACTORS

The Group operates in an environment which is undergoing rapid change
and exposes its operations to a number of risks, some of which are
outside its control. The risks and uncertainties set out below are not
exhaustive and the reader is advised to refer to the Group’s 2015
Registration Document available on its website (www.ipsen.com).

The Group is faced with uncertainty in relation to the prices set for
all its products, in so far as medication prices have come under
severe pressure over the last few years as a result of various
factors, including the tendency for governments and payers to reduce
prices or reimbursement rates for certain drugs marketed by the Group
in the countries in which it operates, or even to remove those drugs
from lists of reimbursable drugs.

The Group depends on third parties to develop and market some of its
products, which generates or may generate substantial royalties for
the Group, but these third parties could behave in ways that cause
damage to the Group’s business. The Group cannot be certain that its
partners will fulfill their obligations. It might be unable to obtain
any benefit from those agreements. A default by any of the Group’s
partners could generate lower revenues than expected. Such situations
could have a negative impact on the Group’s business, financial
position or performance.

Actual results may depart significantly from the objectives given that
a new product can appear to be promising at a development stage, or
after clinical trials, but never be launched on the market, or be
launched on the market but fail to sell, notably for regulatory or
competitive reasons.

The Research and Development process typically lasts between eight and
twelve years from the date of discovery to a product being brought to
market. This process involves several stages; at each stage, there is
a substantial risk that the Group could fail to achieve its objectives
and be forced to abandon its efforts in respect of products in which
it has invested significant amounts. Thus, in order to develop viable
products from a commercial point of view, the Group must demonstrate,
by means of pre-clinical and clinical trials, that the molecules in
question are effective and are not harmful to humans. The Group cannot
be certain that favorable results obtained during pre-clinical trials
will subsequently be confirmed during clinical trials, or that the
results of clinical trials will be sufficient to demonstrate the
safety and efficacy of the product in question such that the required
marketing approvals can be obtained.

The Group must deal with or may have to deal with competition (i) from
generic products, particularly in relation to Group products which are
not protected by patents (ii), products which, although they are not
strictly identical to the Group’s products or which have not
demonstrated their bioequivalence, may obtain a marketing
authorization for indications similar to those of the Group’s products
pursuant to the bibliographic reference regulatory procedure (well
established medicinal use) before the patents protecting its products
expire. Such a situation could result in the Group losing market share
which could affect its current level of growth in sales or
profitability.

Third parties might claim the benefit of intellectual property rights
with respect to the Group’s inventions. The Group provides the third
parties with which it collaborates (including universities and other
public or private entities) with information and data in various forms
relating to the research, development, manufacturing and marketing of
its products. Despite the precautions taken by the Group with regard
to these entities, in particular of a contractual nature, they (or
certain of their members or affiliates) could claim ownership of
intellectual property rights arising from the trials carried out by
their employees or any other intellectual property right relating to
the Group’s products or molecules in development.

The Group’s strategy includes acquiring companies or assets which may
enable or facilitate access to new markets, research projects or
geographical regions or enable the Group to realize synergies with its
existing businesses. Should the growth prospects or earnings potential
of such assets as well as valuation assumptions change materially from
initial assumptions, the Group might be under the obligation to adjust
the values of these assets in its balance sheet, thereby negatively
impacting its results and financial situation.

The marketing of certain products by the Group has been and could be
affected by supply shortages and other disruptions. Such difficulties
may be of both a regulatory nature (the need to correct certain
technical problems in order to bring production sites into compliance
with applicable regulations) and a technical nature (difficulties in
obtaining supplies of satisfactory quality or difficulties in
manufacturing active ingredients or drugs complying with their
technical specifications on a sufficiently reliable and uniform
basis). This situation may result in inventory shortages and/or in a
significant reduction in the sales of one or more products.

In certain countries exposed to significant public deficits, and where
the Group sells its drugs directly to public hospitals, the Group
could face discount or lengthened payment terms or difficulties in
recovering its receivables in full. The Group closely monitors the
evolution of the situation in Southern Europe where hospital payment
terms are especially long. More generally, the Group may also be
unable to purchase sufficient credit insurance to protect itself
adequately against the risk of payment default from certain customers
worldwide. Such situations could negatively impact the Group’s
activities, financial situation and results.

In the normal course of business, the Group is or may be involved in
legal or administrative proceedings. Financial claims are or may be
brought against the Group in connection with some of these proceedings.

The cash pooling arrangements for foreign subsidiaries outside the
euro zone expose the Group to financial foreign exchange risk. The
variation of these exchange rates may impact significantly the Group’s
results.